The Commodity Futures Trading Commission’s decision to request a fraud complaint against Goldman Sachs, combined with Wednesday's conviction of former billionaire hedge fund trader Raj Rajaratnam on insider trading, prompted noted banking analyst Richard Bove at Rochdale Securities to cut his rating on the investment firm to “sell” from “neutral.”
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The Goldman Sachs booth on the floor of the New York Stock Exchange
The CFTCcharges, revealed in a quarterly Securities and Exchange Commissionfiling, concern allegations that “Goldman knew, or should have known” that broker-dealer subaccounts at Goldman belonged to broker-dealer customers and not Goldman.
The sweeping Rajaratnam verdictcould “embolden the CFTC to pursue this case more aggressively, and it is possible that a trial will follow,” Bove said in a note to clients.
According to Bove, Goldman has become government’s “foil for the causation of the financial crisis,” and in his view Goldman hasn’t done enough to distance itself from this view.
“Until it does so or until the government exacts its penalties, this stock is a bad purchase,” Bove said. "It does not really matter who is right."
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Disclosures:
Disclosure information was not available for Richard Bove or his company.